Scottish Court of Session Decisions

George Anderson, manager for and on behalf of the North of Scotland Bank, Limited, Aberdeen, appealed under section 133 of 5 and 6 Vict. cap. 35, as amended by section 6 of 28 Vict. cap. 30, against an assessment of £35,840, 7s., made upon the company on its own return under Schedule D of the Income-Tax Acts for the year 1888–9, and craved to have it restricted to £27,036, 8s. 7d., and inasmuch as the tax on the assessment had been paid, craved to have a certificate of over-assessment, and to be repaid the sum of £220, 1s. 11d., tax at 6d. per pound on £8803, 8s. 5d., for the year 1888–9.

The Commissioners having fully considered the case, were of opinion (1) that the words “within or at the end of the current year” did not imply a limitation but an extension of time; (2) that even assuming the view of the case of The Cape Copper Company, presented by the Assessor, the claim in the present instance had been intimated within a reasonable time. They accordingly sustained the appeal, and on the application of the appellant granted a certificate of over-payment.

The Surveyor being dissatisfied with this decision, the present case was stated at his request under the Taxes Management Act 1880, for the opinion of the Court of Exchequer upon the following questions:—“(1) Whether the Commissioners' decision is subject to appeal or review? and (2) if it be so, whether according to the facts stated, the Commissioners had powers to grant a certificate of over-payment for the year 1888–89?”

The facts as stated in the case were these:—(1) The company was assessed under Schedule D on its own return on the full amount of its untaxed profits on the average of the three years 1885, 1886, and 1887, as shown by its balance-sheets made up to 30th September in each of these years. (2) The proved amount of the untaxed profits for the year of assessment, estimated in conformity with section 6 of 28 Vict. cap. 30, on the average of the three years, including the year of assessment, fell short of the amount assessed by the sum of £8803, 18s. 5d., and it is the tax on this sum at the rate of 6d. per pound (£220, 1s. 11d.) which is the amount of which repayment is sought for 1888–89. (3) The company's balances for each of the years on which the foregoing average is founded were certified by the company's auditors as under:—1886, on 15th October 1886; 1887, on 17th October 1887; and 1888, on 12th October 1888. (4) The meetings of the shareholders at which these balances and directors' reports were approved, were held as under:—1886, on 5th November 1886; 1887, on 4th November 1887; and 1888, on 2nd November 1888. (5) At the time the company made the return for the year 1888–89 the profits of the year of assessment were not and could not be known, the company's financial year ending on 30th September in each year. (6) No intimation of any appeal was made until 10th July 1890. In support of the appeal,

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Mr Alexander Edmond, law-agent for the bank, referred to the provisions of the section of the Act (5 and 6 Vict, cap. 35, section 133) under which the appeal was made, and contended that the words “within or at the end of the year current at the time of making any assessment under this Act, or at the end of any year when such assessment ought to have been made,” did not impose any limitation of time.

Section 133 of the Income Tax Act 1842 provides—“And be it enacted, that if within or at the end of the year current at the time of making any assessment under this Act, or at the end of any year when such assessment ought to have been made, any person charged to the duties contained in schedule D, whether he shall have computed his profits or gains arising as last aforesaid on the amount thereof in the preceding or current year, or on an average of years, shall find, and shall prove to the satisfaction of the Commissioners by whom the assessment was made, that his profits or gains during such year for which the computation was made fell short of the sum so computed in respect of the same source of profit on which the computation was made, it shall be lawful for the said Commissioners to cause the assessment made for such current year to be amended in respect of such source of profit as the case shall require, and in case the sum assessed shall have been paid, to certify under their hands to the Commissioners for Special Purposes at the head office of Stamps and Taxes in England the amount of the sum overpaid on such first assessment; and thereupon the said last-mentioned Commissioners shall issue an order for the repayment of such sum as shall have been so overpaid.” …

Argued for the Surveyor of Taxes—1. On the Competency—Assuming that the question decided by the Commissioners was whether the bank's claim for a certificate had been made within a reasonable time or not, an appeal from their decision was competent, appeals on questions of that kind from decisions of General Commissioners having been allowed before—16 and 17 Vict. c. 34, sec. 52; Charlton v. Commissioners of Inland Revenue, May 22, 1890, 17 R. 787; Lothian v. Macrae, December 12, 1884, 12 R. 336. The real question also in this case was one of law, namely, whether under the Act the Commissioners were entitled to give a certificate or not. Under the Income Tax Act 1842, appeals were regulated by sec. 118, and an additional privilege was given by sec. 133, but under The Taxes Management Act 1880, sec. 57, the whole of the remedies given to assessed parties by application to the Commissioners were grouped under the title “appeals,” and therefore the present case fell under section 59 of The Taxes Management Act, and was competent. 2. The words in sec. 133 of 5 and 6 Vict. c. 35, “within or at the end of the year current,” meant in this case within or at the end of the year from 5th April 1888 to 5th April 1889. The exact time after the end of the year within which the taxpayer must apply to the Commissioners was left indefinite, because difficulties in the ascertainment of profits might arise; but when the profits had been ascertained, the tax-payer was bound to proceed forthwith to prove any deficiency to the Commissioners. The Act 23 Vict. c. 14, had no application. It imposed a limitation where there was none before. Here there was one already. The special feature of this case was that the shortcoming was discovered by the bank on 12th October 1888, i.e., within the year of assessment, but no application was made to the Commissioners till twenty months thereafter, of more than a year after the end of the year of assessment. The present case was distinguished from that of The Cape Copper Company, infra, because here the Court knew when the deficiency was discovered; there, as Mr Justice Lindley stated, they had not. The way in which the English Court treated the case was that latitude was to be allowed in discovering the error but not in making the claim for repayment. The appeal here had not been intimated with reasonable despatch, and the Commissioners should not have granted a certificate. Further, the application to the Commissioners should have been, not for a certificate of over-payment, but for amendment of assessment.

Argued for the bank—1. There was no question of law raised for the consideration of the Court, as the Commissioners had merely decided that the application for a certificate had been made within a reasonable time, and the appeal was therefore incompetent. Further, under the Taxes Management Act, section 59, an appeal to this Court could only be taken “on the termination of any appeal” to the Commissioners. In the present case the bank had merely applied to the Commissioners for a certificate of over-payment, and such an application was not an “appeal” in the sense of section 59— Strain v. Strain, June 26, 1886, 13 R. 1029. 2. The words “within or at the end of the year,” &c., did not impose any limitation of time, but merely that the tax-payer might have the assessment made upon him amended either before or after the year had expired. The only limitation, therefore, was that of three years imposed by 23 Vict. cap. 14. Where the Legislature intended to limit the period within which appeals should be competent, precise language was used, such as “within three months after the end of such year,” or “within six months after the expiration of the year for which the duty is assessed.” Assuming that there was doubt whether section 133 of 5 and 6 Vict. c. 35, contained a limitation, tax-payers were entitled to the benefit of the doubt. Further, even supposing the section did contain a limitation, it must be construed in a reasonable manner, i.e., a reasonable time must be allowed to the tax-payer within which to lodge his claim, and the bank here had intimated its claim within a reasonable time— in re Cape Copper Mining Company, 1888, 21 QBD 313, 2 T.C. 332.

At advising—